Chinese chip maker Fujian Jinhua is accused of stealing US technology. This time, China is fully prepared to fight back

  • Billy Huang says the US indictment is only the latest twist in the long-running saga of its complaints about China’s intellectual property theft. Beijing’s steely response, as expected, only ratchets up the tension over the trade war
PUBLISHED : Wednesday, 21 November, 2018, 2:03pm
UPDATED : Wednesday, 21 November, 2018, 7:20pm

US Vice-President Mike Pence has added fuel to the fire of the trade war and also reportedly threatened “a cold war” unless China makes substantial changes on a wide range of issues, with technology theft at the top of the list. He made the remark in the wake of President Donald Trump’s claim that China “got rid of” its “Made In China 2025” plan because he told the Chinese he “found it insulting”.

And looking at the case of Chinese memory chip maker Fujian Jinhua Integrated Circuit Co, accused of stealing trade secrets from US semiconductor firm Micron Technology, I am pessimistic about the prospects of talks at the G20 summit in Argentina making any progress towards a resolution on the trade war.

Jinhua, created with an initial investment of 3 billion yuan (US$432 million) from a government-backed fund, was a feather in the cap for China’s 13th five-year plan and Made in China 2025. Its aim was to spearhead the country’s efforts to catch up with the world leaders in key innovation areas like chip making.

On November 1, the US Department of Justice issued indictments against Jinhua, Taiwan-based United Microelectronics, and three former Micron employees for economic espionage and stealing the trade secrets of Micron, an industry leader. Before the Department of Justice took action, the US Commerce Department added Jinhua to a list of companies banned from buying components, software and technology goods from US firms. As chip manufacturing demands the seamless integration of the supply chain and American companies dominate the field, the move has strangled Jinhua and crippled China’s chip industry as a whole.

China ‘has taken the gloves off’ in its thefts of US technology secrets

Neither Jinhua nor the Chinese government have flinched so far. Jinhua in fact took Micron to court in Fujian for alleged patent infringement. The court ruled in Jinhua’s favour in July and Micron was banned from selling its chips in China, whose market accounted for half of its US$20.3 billion revenue in the financial year 2017. During the lawsuit, the court did not give Micron any opportunity to defend itself, according to a statement from the company.

In a statement issued after the US indictment, Jinhua stressed that it “attaches great importance to the protection of intellectual property rights, and there is no theft of other company’s technology”, and added that “Micron has always taken Jinhua’s development as a threat”.

The Chinese government has always denied any allegations that there is widespread theft of American technologies. On July 18, Ministry of Foreign Affairs spokeswoman Hua Chunying came out swinging at a regular news conference for foreign correspondents.

“Is it true that China is stealing US intellectual property? Not true! The US has severely distorted what happened in the past and is happening right now by accusing China of stealing intellectual property,” she said. “China is pursuing innovation-driven development. Every innovative achievement we have today is made through the wisdom and hard work of our 1.3 billion people, not by stealing or robbing.”

Trade war: why US and China remain so far apart on IP rights

China’s deputy minister of commerce, Wang Shouwen, gave a rather confusing picture when asked about Micron and the Jinhua case during his trip to Washington DC for talks on the trade war. Officials familiar with the talks quoted the minister as saying that Micron and Jinhua “are like brothers, and brothers fight”.

It’s understandable that the trade complexities between China and America do not fit into any simple narrative. But if we take Beijing’s own words seriously, it shows a clear pattern of a “whole society” approach in efforts to reshape the world order, especially in technology catch-up. In the Jinhua case, the chip maker, the commerce ministry, the foreign ministry and the courts have all played a role.

In the Jinhua case, the chip maker, the commerce ministry, the foreign ministry and the courts have all played a role

The US indictment will certainly ratchet up tensions, especially before Xi and Trump meet at the G20. Mistrust of China is common when it comes to technology theft, even though top leaders are sparing no effort to convince the West that China will continue to open up and improve the business environment for foreign companies. However, feedback from many Western companies has been lukewarm at best. Wang Qishan’s comments in Singapore at the Bloomberg New Economy forum made it clear that different models of development should be respected.

The only good sign is that China recently requested that the US provide “concrete evidence” about the theft of trade secrets. The Jinhua case should be a good litmus test of results from the G20 meeting. Both sides need to stop confusing vanity with confidence, lower the rhetoric and turn words into action.

Billy Huang is a media veteran who served leading media outlets in Beijing, Hong Kong, Singapore and America for more than 20 years. [email protected]